Resolution plan binding on Central & state govts, local authorities, says Supreme Court
The Supreme Court in an important judgement on has reiterated that once a resolution plan is duly approved by the Adjudicating Authority, the claims as provided in the resolution plan should stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders.
It further said that on the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, will stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
The order from apex court came after hearing a bunch of appeals and writ petitions jointly on 13 April 2021. The court was hearing an appeal from Ghanshyam Mishra and Sons Pvt Ltd (GMSPL), the successful resolution applicant of Orissa Manganese and Minerals Limited, against the observations made by NCLAT to the effect, that the claims of the parties, which are not included in the Resolution Plan could be agitated by them before the other forums, has preferred the present appeal.
Read the summary of the full Judgement
With GMSPL’s appeal, the court had clubbed a couple of more appeals – one by Ultratech Nathdwara Cement (formerly Binani Cement) and Electrosteel Steels Ltd – and a writ petition filed by the consortium of Aion Investment Private Limited and JSW Steel Limited (the successful resolution applicant of Monnet Ispat).
The Supreme Court said that 2019 amendment to Section 31 of the Insolvency and Bankruptcy Code (IBC) is clarificatory and declaratory in nature and, therefore, will be effective from the date on which IBC has come into effect.
Consequently, it said that all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, will stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.
In 2019, the government has amended the Section 31 of IBC by clearly mentioning central government, state government and local authorities after the words members, creditors so as to ensure that government agencies do not hound successful resolution applicants for any past dues.
